The stock market crash means that today you have a wide range of cheap UK stocks. In the long run, they could generate impressive returns that will earn you a surprisingly large retirement nest egg. From there, you could receive generous passive income that offers financial freedom in old age.
Therefore, gold and Bitcoin may be more popular assets among investors today. However, their recent price gains and the appeal of UK stocks may mean that investing your money in the stock market is a superior decision.
The outlook for cheap UK stocks
The near-term outlook for cheap UK stocks is relatively uncertain. Risks such as Brexit and economic hardships such as rising unemployment could weigh on the financial performance of many FTSE 100 and FTSE 250 stocks in the coming months. This could negatively impact investor sentiment, putting pressure on stock prices after their recent rebound.
However, the valuations of many UK stocks suggest that investors have largely taken into account the uncertain outlook. Many high-quality companies are currently trading for lower prices than they were for many years. Current prices may underestimate their financial strength and their ability to successfully recover over the next few years.
Therefore, buying a selection of cheap UK stocks now can prove to be a profitable operation. They may be among the investments that will benefit most from a likely economic recovery in the years to come. A stimulus in fiscal policy and a loose monetary policy can combine to produce better operating conditions for many companies which translate into high returns.
Investing in Gold and Bitcoin
Of course, some investors may wish to avoid cheap UK stocks in favor of other assets such as Bitcoin and gold. They are relatively popular assets at the moment, with prices rising rapidly during 2020.
However, higher prices may mean fewer opportunities for return on capital. Investors may have taken into account a positive outlook for both assets which may ultimately not materialize. For example, an improving economic outlook may mean that the attractiveness of gold as a defensive asset is reduced. Meanwhile, Bitcoin may suffer from a regulatory change that limits its ability to become more prevalent outside of an investment opportunity.
The long track record of success of investors buying cheap UK stocks suggests that they offer a more reliable way to build a retirement portfolio. From there, you could potentially earn attractive passive income that offers greater financial freedom in old age. As such, perhaps now is the time to start building a portfolio of high-quality companies while trading low for what may turn out to be a limited time.
The post Forget Gold and Bitcoin. I would buy cheap UK stocks to retire with generous passive income that first appeared on The Motley Fool UK.
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Motley Fool United Kingdom 2020